Prospect
of £1.7bn fine looms large over PM's talks with EU leaders
Demand
from European fraud watchdog underlines challenges facing Theresa May
as she heads to summit on Thursday
Rowena Mason and
Jennifer Rankin
Wednesday 8 March
2017 22.30 GMT
The prospect of a
£1.7bn fine imposed on the UK by the EU’s fraud watchdog is
expected to loom large in Theresa May’s meetings with European
leaders at a summit on Thursday.
The prime minister’s
spokesman rejected accusations on Wednesday from Olaf (Office
Européen de Lutte Antifraude) that Britain is liable for allowing
criminal gangs to flood black markets in the continent with illegal
Chinese goods.
The body recommended
on Tuesday that the UK pay €1.98bn into the EU budget to compensate
for lost customs duties. But May’s spokesman said the UK government
does not recognise the proposed fine, paving the way for a dispute
between Britain and the European authorities.
The demand from Olaf
underlines the difficult challenge May is likely to face as she seeks
to extricate Britain from the EU without a hefty divorce bill. If the
European commission demanded the fine while the UK was still a
member, May would come under huge pressure from MPs not to pay up.
Charlie Elphicke,
the Conservative MP for Dover and Deal, said: “This is not down to
the failure of the UK to work on the matter. This is down to a fraud
being conducted by overseas traders. Many people, including myself,
are concerned, which is why I asked the National Audit Office to
investigate.
“But it would be
fundamentally wrong, it would be a flawed announcement to say this
was the fault of the British government. It would be wrong for Olaf
to point the finger at us. It would be even more wrong for the
commission to seek state proceedings.”
The prime minister
is heading to the summit on Thursday afternoon despite the UK’s
intention to formally notify the EU within days of its intention to
leave the bloc.
She will attend
sessions and a dinner on the migration crisis and Russia’s
influence on the western Balkans, as well as voting on the future of
Donald Tusk, the European council president, who is facing a
challenge for his position from his own country, Poland.
During the dinner,
the prime minister is likely to raise concerns that the EU needs to
do more to tackle “Russian disinformation” in eastern Europe, her
spokesman said.
She will be unable
to discuss Brexit at the EU summit, as the government has not
triggered article 50 and will not be able to do so until legislation
has passed through the Commons, which will be next Tuesday at the
earliest.
At a press
conference on Thursday afternoon, May is likely to face questions
about the cost of Brexit and whether the UK would be prepared to pay
up if the commmission accepts Olaf’s accusations that it has been
negligent about fraud.
Olaf said the fraud
was ongoing and that the cost to national exchequers was even
greater. France, Germany, Spain and Italy are estimated to have lost
a combined €3.2bn in VAT revenues between 2013 and 2016 as a result
of British failures in handling imports at its ports.
Relations between
Britain and some member states, such as France and Italy, were
strained over trade in the runup to Brexit. The British government
has been in the vanguard of countries defending EU rules that allow
artificially cheap (but legal) Chinese steel into European markets,
hurting European jobs and companies.
The EU’s 28 member
states belong to a customs union, where a common tariff is levied on
imports from outside the bloc. About 80% of customs duties are used
to fund the EU budget.
Anti-fraud
investigators said they had repeatedly warned British customs
officials about the scale of the fraud. A spokesperson said: “Despite
repeated efforts deployed by Olaf, and in contrast to the actions
taken by several other member states to fight against these
fraudsters, the fraud hub in the UK has continued to grow.”
In one example given
by the anti-fraud team, women’s trousers imported from China were
declared in the UK at an average price of €0.91 a kilogram,
although market prices for cotton were €1.44, a disparity that
failed to raise the alarm in Britain.
A senior French
anti-fraud investigator said the UK had mostly not responded to
requests to trace goods. Bruno Collin, at the French National
Directorate of Intelligence and Customs Investigation, told Politico
that his British counterparts had not made an effort. “UK
authorities are not interested at all in cooperating in this field,
probably because the phenomenon does not directly affect them,” he
said.
Politicians opposed
to Brexit said the findings raised more questions about the
government’s plans to quit the EU’s customs union. “The UK
border force is asleep at the wheel and it’s going to cost the
taxpayer billions,” said Alistair Carmichael, a Liberal Democrat
MP. “This doesn’t bode well for reckless plans to leave the
customs union and set up border checks for all goods coming into the
UK.”
The decision about
whether to fine the UK will be taken by the European commission.
Asked whether the UK
would pay a fine, May’s spokesman said: “We’ve not received a
bill from the European commission. This report is not a bill. It’s
an estimate. We don’t recognise the figures. HMRC are looking at it
now.”
HMRC said it had an
“excellent record in tackling fraud and rule-breaking of all kinds”
and was considering Olaf’s findings and recommendations.
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